The Senate Investigations Subcommittee released its Levin-Coburn Report On the Financial Crisis, which is entitled “Anatomy of a Financial Collapse.” It is 635 pages and reads like a crime fiction novel. “The report catalogs conflicts of interest, heedless risk-taking and failures of federal oversight that helped push the country into the deepest recession since the Great Depression,” the committee says.
After the first few chapters, the excitement dies and it become clear that there is not a single conclusion in the document that was not released long ago. The culprits are high risk lending to people who could not afford to repay their mortgages, failure by regulatory agencies which missed the gathering storm created by subprime loans, credit rating agencies which gave out AAA ratings to nearly every piece of paper Wall St. issued before the credit crisis, and investment banks which “flooded financial markets with high-risk assets.”
The media has reported repeatedly that no one was punished for these lapses. There is so much blame to go around, that it is hard to say where responsibly for the credit crisis begins and ends. The conclusion that investment banks are grubby operations which act based on greed and profit has been known for a very long time. That regulators did their jobs poorly. The actions of bond rating agencies is somewhat of a shock, but the incentive for their actions was profit, which make them little different from any other business. Private enterprises which were part of the collapse were self-interested and the government failed to see that or curtail it.
It is a shame and cynical to say that The Senate Investigations Subcommittee Levin-Coburn Report On the Financial Crisis will end up in a dust bin. The document is the result of countless hours of work by well-intentioned elected officials and their staffs. But, there has been so little real reform that punishing those who caused the crisis may satisfy a need for justice but does nothing to set up the checks and balances needed to correct fundamental flaws in the system that nearly brought the worldwide economy to its knees.
The committee might say that the Dodd–Frank Wall Street Reform and Consumer Protection Act will rein in dangerous actions by banks as well as those financial firms which put consumers at disadvantages. There are already territorial fights within the government about how the legislation should be interpreted and which agencies should handle enforcement. Austerity legislation may well cut the budgets of part of the government that would make Dodd-Frank work. The new laws were certainly needed. Whether they are useful is another matter.
The financial crisis report is a fine piece of history. Its recommendations are old and have already been articulated and, at least under law, remedied. If the past is any guide, the articulation and the law will not do much to curtail the practices that they seek to limit.
Goldman Sachs CEO Lloyd Blankfein, his new multimillion bonus in hand, can sleep well at night.
Douglas A. McIntyre